Page (s) | ||||
Report of
Independent Registered Public Accounting Firm |
1 | |||
Financial Statements |
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Statements of Net Assets Available for
Benefits at December 31, 2005 and 2004 |
2 | |||
Statement of Changes in Net Assets
Available for Benefits for the year ended December 31, 2005 |
3 | |||
Notes to Financial Statements |
4 - 8 | |||
Supplemental Schedule |
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Exhibit I Schedule H, Line 4i Schedule of Assets (Held at End of Year) December 31, 2005 |
9 |
Note: | Other schedules required by Section 2520.103-10 of the Department of Labors Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. |
2005 | 2004 | |||||||
Assets |
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Investments,
at fair value |
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Investments in mutual funds |
$ | 2,600,509 | $ | 1,853,952 | ||||
Investment
in First BanCorp. common stock |
297,244 | 934,931 | ||||||
Participant loans receivable |
130,788 | 175,051 | ||||||
Total investments |
3,028,541 | 2,963,934 | ||||||
Receivables |
||||||||
Employer contributions |
127,133 | 130,597 | ||||||
Other receivables, principally interest and dividends |
1,542 | |||||||
Due from broker for security sold |
10,248 | |||||||
Total receivables |
138,923 | 130,597 | ||||||
Cash |
17,812 | 41,823 | ||||||
Total assets |
3,185,276 | 3,136,354 | ||||||
Liabilities and Net Assets Available for Benefits |
||||||||
Account payable |
10,896 | |||||||
Due to broker for securities purchased |
10,085 | |||||||
Total liabilities |
20,981 | |||||||
Net assets available for benefits |
$ | 3,164,295 | $ | 3,136,354 | ||||
2
2005 | ||||
Additions |
||||
Investment
income (loss) |
||||
Net depreciation in fair value of investments |
$ | (495,045 | ) | |
Interest income on participant loans |
9,296 | |||
Dividends |
96,588 | |||
(389,161 | ) | |||
Contributions |
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Employer |
172,148 | |||
Participants |
281,661 | |||
Rollovers from other qualified plans |
71,648 | |||
525,457 | ||||
Total additions |
136,296 | |||
Deductions |
||||
Benefits paid to participants |
(107,376 | ) | ||
Administrative expenses |
(979 | ) | ||
Total deductions |
(108,355 | ) | ||
Net increase in net assets available for benefits |
27,941 | |||
Net assets available for benefits |
||||
Beginning of year |
3,136,354 | |||
End of year |
$ | 3,164,295 | ||
3
1. | Description of the Plan | |
Reporting Entity The accompanying financial statements include the assets of the FirstBank 401(k) Retirement Plan for Residents of the U.S. Virgin Islands and of the United States of America (the Plan) sponsored by FirstBank Puerto Rico (the Bank) for its U.S. Virgin Islands and United States of America employees only. The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a complete description of the Plans provisions. |
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General The Plan is a defined contribution plan, which became effective on May 15, 1977. Effective September 1, 1991, the Plan was further amended to become a savings plan under the provisions of the U.S. Internal Revenue Code. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). |
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Eligibility All full-time employees are eligible to participate in the Plan after completion of one year of service. |
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Contributions Participants are permitted to contribute up to 10% of their pre-tax annual compensation, as defined in the Plan, and up to an additional 8% on an after-tax basis. During the plan year, pre-tax contributions were limited to a maximum of $14,000 per year. The Bank is required to make a matching contribution of twenty-five cents for every dollar on the first 4% of the participants compensation that a participant contributes to the Plan on a pre-tax basis. In addition, the Bank may voluntarily make additional discretionary contributions to the Plan at the end of the year to be distributed among the participants accounts as established in the Plan. Investment of participants and employers contributions are directed by participants into various investment options, which include several mutual funds and the common stock of First BanCorp., the Banks parent company. The Plan allows for rollover contributions from other qualified plans. Contributions are subject to certain limitations. |
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Participant Accounts Each participants account is credited with the participants contributions and allocations of (a) the Banks contributions and (b) Plan investment earnings, and charged with an allocation of investment management expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participants vested account. |
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Vesting Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Banks contribution portion of their account is based on years of continuous service. A participant is 100% vested after five years of credited service. |
4
Years of | Vested | |||
Service | Percentage | |||
Less than 2 |
0% | |||
2 |
20% | |||
3 |
40% | |||
4 |
60% | |||
5 or more |
100% |
Loans to Participants Under the terms of the Plan, participants are allowed to borrow from their accounts up to 50% of their vested account balance or $50,000 whichever is less. Loan transactions are treated as a transfer to (from) the investment funds from (to) the Participants Loan Fund. Loans are collateralized by the balance in the participants accounts and bear interest at the rate determined by the Plan administrator at the time of the loan. At December 31, 2005 and 2004 the interest rates of these loans range from 4.75% to 9.5% and are due at various dates through May 14, 2011. Principal and interest is paid ratably through biweekly payroll deductions. |
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Payment of Benefits Plan participants are permitted to make withdrawals from the Plan, subject to provisions in the Plan agreement. If a participant suffers financial hardship, as defined in the Plan agreement, the participant may request a withdrawal from his or her contributions. In the case of participant termination because of death, the entire vested amount is paid to the person or persons legally entitled thereto. |
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Benefits are paid in a lump-sum cash payment. If the value of the vested account is more than $5,000, the participant may elect to defer any benefit payable under the Plan until a specified future date. If benefit payments are to be deferred, the Plan will earmark the balance as part of its assets in a special account or a deposit certificate with the funds of the former member. Interest earned on such special account is paid to the participant. Such special accounts or certificates do not participate in the allocation of the Banks contributions or earnings of the Plans investments. There were no deferred vested benefits at December 31, 2005 and 2004. | ||
Plan Expenses and Administration Bank and participant contributions were held by AST Trust Company until April 1, 2005 and Charles Schwab thereafter, as custodians, and managed by Milliman USA, Inc. as plan recordkeeper, both appointed by the Board of Directors of the Bank. The custodian invests cash received, interest and dividend income and makes distributions to participants. |
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Administrative expenses for the custodians and recordkeepers fees are paid by the Bank unless there are forfeitures available to offset such expenses. | ||
Forfeitures Forfeited balances of terminated participants nonvested accounts are used to reduce future Bank contributions or used to cover administrative expenses of the Plan. |
5
2. | Summary of Significant Accounting Policies | |
Basis of Financial Statements The Plans policy is to prepare its financial statements using the accrual basis of accounting. |
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Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Contributions Employee contributions are recorded in the period in which the Bank makes payroll deductions from the participants compensation. Matching employers contributions are recorded in the same period. Discretionary contributions are recorded in the period in which they are approved. |
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Investments Valuation and Income Recognition The Plans investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices at the reporting date. First BanCorps common stock is valued at its quoted market price which represents the net asset value of shares held by the Plan at the reporting date. The Plan presents in the statement of changes in net assets available for benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments. |
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Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. | ||
Participant Loans Participant loans are valued at their outstanding balance, which approximates fair value. |
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Payment of Benefits Benefits are recorded when paid. |
6
3. | Investments | |
The following presents the Plans investments: |
2005 | 2004 | |||||||||||||||
Value | # of shares | Value | # of shares | |||||||||||||
Ameristock Mutual Fund* |
$ | 170,002 | 4,414 | $ | 134,411 | 3,316 | ||||||||||
Ariel Mutual Fund |
68,084 | 1,360 | 51,379 | 966 | ||||||||||||
Dodge & Cox Balanced* |
180,077 | 2,214 | 138,265 | 1,742 | ||||||||||||
First
BanCorp. common stock* |
297,244 | 23,952 | 934,931 | 14,721 | ||||||||||||
Fmi Focus* |
187,888 | 5,781 | 134,574 | 3,873 | ||||||||||||
Ge Premier Growth* |
188,909 | 7,017 | 159,902 | 5,881 | ||||||||||||
Harbor Bond Mutual Fund* |
439,323 | 37,807 | 325,683 | 27,530 | ||||||||||||
Harbor International Institutional Fund* |
389,534 | 7,898 | 216,419 | 5,068 | ||||||||||||
Schwab Money Fund* |
773,429 | 773,439 | ||||||||||||||
Vanguard S&P500 Indexed Fund* |
203,263 | 1,769 | 155,783 | 1,395 | ||||||||||||
Participant
loans receivable |
130,788 | 175,051 | ||||||||||||||
Vanguard Money Market* |
537,536 | 537,536 | ||||||||||||||
$ | 3,028,541 | $ | 2,963,934 | |||||||||||||
*Investment exceeds five percent of net assets available for benefits. | ||
During 2005, the Plans investments (including gains and losses on investments bought and sold) appreciated (depreciated) in value as follows: |
Mutual funds |
$ | 26,806 | ||
Common stock
First BanCorp. |
(521,851 | ) | ||
$ | (495,045 | ) | ||
4. | Related Party-In Interest Transactions | |
Certain Plan investments are shares of a mutual fund managed by The Charles Schwab Trust Company, which is also a provider of custodial services as defined by the Plan since April 1, 2005. In addition, at December 31, 2005 and 2004, the Plan held 23,952 and 14,721 units, with a quoted market value of $297,244 and $934,931, respectively, of common stock of First BanCorp., the Financial Holding Company of the sponsoring employer. These transactions qualify as party-in-interest transactions permitted under provisions of the Employee Retirement Income Security Act (ERISA). |
7
5. | Tax Status | |
The Internal Revenue Service has determined and informed the Bank under letter dated December 22, 2003 that the Plan is designed in accordance with the applicable sections of the U.S. Internal Revenue Code (IRC) and, therefore, exempt from income taxes. The Plan has not been amended since receiving the determination letter other than an amendment to change the Plan name. The Plan Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. | ||
6. | Plan Termination | |
Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts and such termination shall not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination. | ||
7. | Forfeited Amount | |
Forfeited nonvested accounts amounted to $4,928 at December 31, 2005 (2004 $0). These accounts are transferred by the Plan administrator to an unallocated account to be used to cover administrative expenses of the plan or reduce the Banks future contributions. In 2005, $979 (2004 $6,671) from forfeited non-vested accounts were used to cover administrative expenses of the Plan. No forfeitures were used to reduce the Banks contributions in 2005. | ||
8. | Risks and Uncertainties | |
The Plans investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the values of investments, it is at least reasonably possible that changes in these factors in the near term would materially affect participants account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits. | ||
9. | Additional Contribution | |
The Board of Directors of the Bank approved in 2006 an additional contribution of $127,133 based on the Banks 2005 results. Such additional contribution has been recorded as an employer contribution receivable at December 31, 2005 and on contribution from employer in the accompanying financial statements. In addition, as a result of the Plans non-compliance with its non-discrimination test, the Plan will reimburse during 2006 excess contribution of $10,896 to the Plan participants, which amounts are recorded as accounts payable at December 31, 2005 in the accompanying financial statements. |
8
December 31, 2005 and 2004 | Exhibit I |
(a) | (b) Identity of issue, borrower | (c) Description of Investment including | (d) Cost | (e) Current value | ||||||
lessor or similar party | maturity date, rate of interest, par value | |||||||||
Ameristock Mutual Fund | Mutual Fund, 4,414 shares | ** | $ | 170,002 | ||||||
Ariel Mutual Fund | Mutual Fund, 1,360 shares | ** | 68,084 | |||||||
Dodge & Cox Balanced | Mutual Fund, 2,214 shares | ** | 180,077 | |||||||
*
|
First BanCorp. Common Stock | Common stock, 23,952 shares | ** | 297,244 | ||||||
Fmi Focus | Mutual Fund, 5,781 shares | ** | 187,888 | |||||||
Ge Premier Growth | Mutual Fund, 7,017 shares | ** | 188,909 | |||||||
Harbor Bond Mutual Fund | Mutual Fund, 37,808 shares | ** | 439,323 | |||||||
Harbor International Equity Fund | Mutual Fund, 7,898 shares | ** | 389,534 | |||||||
*
|
Schwab Money Fund | Mutual Fund, 773,429 shares | ** | 773,429 | ||||||
Vanguard S&P 500 Indexed Fund | Mutual Fund, 1,769 shares | ** | 203,263 | |||||||
*
|
Participant loans receivable | Interest rate ranging from 4.75% to 9.5%, maturity dates of 1/19/2006 to 5/14/2011 | ** | 130,788 | ||||||
$ | 3,028,541 | |||||||||
9
FIRST BANCORP. |
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Date: 7/14/2006 | By: | /s/ Luis M. Cabrera | ||
Authorized Representative | ||||
Date: 7/14/2006 | By: | /s/ Aida M. García | ||
Authorized Representative | ||||